Time to take a risk?

Global supply chain risk has hit a high driven by uncertainty over the UK’s decision to leave the European Union, according to the CIPS Risk Index.

The index climbed to 80.8 in the second quarter of 2016 continuing a worsening trend with sluggish growth across both developed and emerging market economies.

The Index, produced for the Chartered Institute of Procurement & Supply by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains.

The UK is yet to start the process of negotiating its exit from the EU, and negotiations could take two years. Not only that, there are several possibilities for the final shape of the relationship which will continue to create uncertainty over medium term prospects.

The study highlights the fact that the Brexit vote is part of a wider shift towards trade protectionism. For example US presidential hopeful Donald Trump has indicated that he is likely to seek increased trade barriers with countries such as China and Mexico, which could also have an impact on supply chains.

“In these volatile times, businesses must develop bespoke contingency plans for possible scenarios. This must start with gaining clear visibility of the supply chain to accurately assess emerging risks. The next step would be to ensure supply chains are agile and flexible to adapt and react quickly to changes and disruptions,” said John Glen, CIPS economist and director of the centre for Customised Executive Development at The Cranfield School of Management.

Good advice, but it also has to be recognised that changing market conditions can open up new and unexpected opportunities. No-one is going to get fired for battening down the hatches in the current environment. But the real winners will be those that recognise the supply chain opportunities as the arise, and have the agility to take advantage.